Monday, March 6, 2017

The SBA and cerebrate

Back-formation
from cerebration (act of thinking), from cerebrum (brain).

_____________________________________________TIP OF THE WEEK

Here is something
to cerebrate over.

The latest FDIC
Quarterly Banking Profile indicates that total loans and leases are up
5.3%.

SBA 7(a) lending
was up 13% for the quarter ending 12/31/2016.

That’s good news
for the economy.

Just for fun I
calculated the correlation coefficient between SBA 7(a) loan volume and GDP for
over six years using the Microsoft CORREL function. It came out to a
statistically significant 0.86.

Financial results
for the fourth quarter of 2016 are included in the FDIC's latest Quarterly
Banking Profile. Let me know if you would like a copy of the latest FDIC
Quarterly Banking Profile.

__________________________________________

SBA has changed
SBA form 2462 the franchise addendum. The SBA Addendum now includes a drop down
box and the language regarding termination of the SBA Addendum has been
clarified.

Make sure you have
the latest version of this addendum now required for ALL franchise loans unless
the franchisor has an SBA Negotiated Addendum with a 2015 or 2016 date. If you
have a negotiated addendum you can then use SBA form 2463 the franchisor
certification.

_____________________________________Indices:

PRIME
RATE= 3.75%

SBA
LIBOR Base Rate March 2017 =3.81%

SBA
Fixed Base Rate March 2017 = 6.07%

________________________________________

SBA
504 Loan Debenture Rate for February

The
debenture rate is only 2.82% but note rate is 2.868% and the effective yield is
4.607%.

________________________________________________AHEAD
OF THE YIELD CURVE

Some cerebration
is necessary amongst the splentic presentiment on the economy and interest
rates.

According to the
University of
Michigan its Consumer
Sentiment Index has been higher during the past three months than anytime since
March 2004. The gain represents the result of an unprecedented partisan
divergence, with Democrats expecting recession and Republicans expecting robust
growth. While the expectations of Democrats and Republicans largely offset each
other, the overall gain in the Expectations Index was due to self-identified
Independents, who were much closer to the optimism of the Republicans than the
pessimism of the Democrats.

So Democrats are
expecting recession and Republicans are expecting robust
growth.

What does the
Federal Reserve think?

Bond traders are
now pricing in odds above 75 percent that Federal Reserve policy makers will
raise interest rates when they meet in two weeks, but there is still plenty of
data to chew on before then.

On Friday, the
Labor Department will release its report on jobs for the month of February.
While the Fed does not respond to just one report, they would like to see
something trend-like to support a hike. The labor market began 2017 on a high
note as U.S employers added 227,000 jobs in January. This was the most in four
months.

Keep your eyes and
ears open for Thursday’s auction of 30 year Treasury bonds. Results were quite
solid for last month's 30-year bond auction with the yield at 3.005 percent, 9.1
basis points above the January auction yield and 83.3 basis points higher than
the 2016 July auction low. The 30-year yield has increased by about 15 basis
points over the past week.

Eurodollar futures
settle at a three- month lending rate that has averaged about 22 basis points
more than the Fed's target over the past 10 years.

Here is a summary
of what the market expects for Eurodollar futures based upon the pit-traded
prices at the Chicago Mercantile Exchange:

DEC17-
1.62

DEC18-
2.13

DEC19-
2.44

DEC20-2.63

DEC22-
2.91

DEC23-
3.01

What does all this
mean?

I don’t
know.

Eurodollar futures
imply a quiescent Federal Reserve will not
estivate.

__________________________________________OFF
BASE

Next
week begins with Daylight Saving Time. It ends with Saint Patrick Day on
Friday.

The
first day of Spring follows on Monday.

It
sounds like there should be a holiday somewhere in there as our next holiday
recognized by the Federal Reserve is not for another two and a half
months!

This
is longest break in bank holidays of the year.

According
to the Federal Reserve, here are our remaining holidays for
2017: